Equity Product

• EQ products

An arrear quanto constant-maturity-swap (CMS) is a swap that pays coupons in a different currency from the notional and in arrears. The underlying swap rate is computed from a forward starting CMS.

• core arrear cms pdf
• core arrear cms

Overnight Index Swap (OIS) curves became the market standard for discounting collateralized cashflows. It represents the market expectations of the Federal Reserve overnight lending rate.

We propose a way to build a curve that includes ‘Central Bank Meetings’. A series of Central Bank Days (CB days) are inserted into the market data stream and the model calculates what Central Bank values (CB values) will be:

• core ois pdf
• core ois

Future contracts are traded in an exchange and thus have no credit risk. By locking-in the exchange rates at which the currency will be bought, the party forfeits the opportunity of profiting from a favorable exchange rate movement. Additionally, unfavorable exchange rate movements may take away further opportunity of the party for profit. This presentation gives an overview of currency futures and valuation model.

• core fx futures pdf
• core fx futures

We employ the definitions of the respective hedge ratios, as stated in the section on the WM pricing method. With the exception of the theta, calculated through the finite difference technique, all hedge ratios are computed using the Malliavin weight approach. Additional considerations arise from the impact of the calibration procedure on the sensitivity ratios, as describe in the next section.

• core quanto Himalayan pdf
• core quanto Himalayan

Based on the Hull-White single-factor tree building approach, respective trinomial trees are constructed for the short-term interest rate and stock’s price processes. Using the Hull-White two-factor tree building procedure, a combined tree is constructed by matching the mean, variance and correlation corresponding to each combined tree node. The convertible bond price is given from the combined tree by backward induction.

• core hw convertible pdf
• core hw convertible

The forward swap rate is adjusted to convexity is taken as the mean of the swap rate’s distribution. The price of the swaption is estimated by using Black’s formula. The off-diagonal term of the correlation matrix of the swap rates was estimated from historical data.

• core extendable swap pdf
• core extendable swap

A valuation model is presented for pricing an American style call option on the yield of Treasury bond. The payoff is positive if the yield exceeds a predetermined strike level. The model assumes the yield of an American Treasury bond to be a log-normally distributed stochastic process and uses Monte-Carlo simulation to price the deal as a European call option.

• core American bond pdf
• core American bond

The equity-linked bonus coupon notes typically benefit investors who are moderately bullish the short-term prospects of particular shares or index and who are looking for a guaranteed cash flow. Investors feel also comfortable being put stock at maturity if the asset price is below the strike.

• core bonus pdf
• core bonus

Bond futures are exchange-traded with maturities of 2, 5, 10, 30 years, where the typical underlings are treasury notes or bonds. There are established global markets for bond futures. Bond futures provide a liquid alternative for managing interest rate risk.

• core bond futures pdf
• core bond futures

The ASR approach allows a firm to reduce the number of outstanding shares at a fixed cost, that can reduce any potential threats from the large shareholders for increasing their control of the company at significant levels.

• core ars pdf
• core ars

For historical VaR, the simulated price factors are generated directly from historical values of the price factors. Let P(t) denote a price factor value. The methods used to calculate the simulated values are applied in the same way to all price factors so it suffices to consider a single price factor value, rather than a vector of price factor values.

• core historical VaR pdf
• core historical VaR

A quanto total return Libor Swap is a swap where one leg is a regular floating leg paying LIBOR less a constant spread and the other leg makes a single payment at the swap’s maturity equal to a leveraged non-negative return on USD-for-EURO exchange rate paid in CAD. The main focus of the valuation model is the quantoed total return on the FX rate.

• core quanto TRS pdf
• core quanto TRS

The CPPI strategy allows an investor to expose to upside but protecting against downside. The capital exposure and protection make CPPI one of the most popular derivative products.

The value of a risky asset with a management expense ratio (MER) represents the ‘clean’ price of the asset; that is, the price (f the asset grossed-up by an amount equal to the MER applicable to these fund units.

• core cppi pdf
• core cppi

Broker Strangle Algorithm is used to calibrate FX volatility surface. At anchor expiry terms, the algorithm produces 25% and 10% Delta Call and Put volatilities from market at-the-money volatility, 25% and 10% Delta Risk Reversal and Broker Strangle volatility spreads.

• Broker Strangle Algorithm for Volatility Surface